The pace of sales was almost 29% above the January 2012 estimate of 339,000, and almost 16% above the revised December rate.

The strong showing in January follows an uptick in home builder sentiment and housing starts in recent months that hadn't been matched with an increase in sales. "Now, we're seeing sales pick up," says Patrick Newport, economist with IHS Global Insight.

The homebuilding industry has been starved for good news for years. Last year's new home sales totaled 367,000, making 2012 the third lowest year on record for new home sales. They hit record lows in 2011.

IHS Global Insight expects new home sales to rise to 464,000 this year. IHS doesn't expect new home sales to return to more normal levels, above 800,000 a year, until 2015.

Increased new home sales are a strong indicator of increasing consumer confidence in the overall U.S. housing market, says John Tashjian, principal, Centurion Real Estate Partners.

As buyers absorb existing inventory, builders will ramp up construction starts, which is also give the economy a "much needed shot in the arm," Tashjian says.